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Victims of Government data loss are being encouraged to buy packs claiming to help them claim compensation. Thousands have paid out, but privacy lawyers have warned that success is very unlikely.

One arbitration company is selling £5.99 packs that it claims will help some of the 25 million victims of the HM Revenue and Customs data loss last year make a compensation claim.

But privacy specialists at Pinsent Masons, the law firm behind OUT-LAW.COM, have warned that there is a heavy burden of proof on compensation claimants under the Data Protection Act (DPA), and that any information people might need is already available for free.

"Compensation cannot be awarded by a Court just because an individual is very upset or angry about the loss of personal data, or because they think they may have been damaged by the loss," said Dr Chris Pounder, a privacy specialist at Pinsent Masons.

"The DPA requires individuals to prove the link between the damage that was caused by the loss of personal data to the particular incident where the loss occurred. If this link is proved, then compensation for the actual damage can be awarded. However, this damage has to be measurable and quantifiable and damage cannot be "created" in support of a claim."

Claimants must be able to meet the burden of proof said Rosemary Jay, one of the Pinsent Masons specialist privacy lawyers.

"Even where there has been a loss of personal data such as name, address and bank account details, and the victim subsequently finds that there has been a misuse of personal data, it may be difficult to show a causational link because such data can be obtained elsewhere, maybe from the Electoral Roll or a cheque book," she said. "There needs to be some evidence that links the identity theft to a data loss incident."

Pounder said he found "alarming" reports that "tens of thousands of individuals are paying for advice on the matter of compensation, in circumstances when taking the law into consideration, there is very little prospect of success".

"The Inland Revenue have now written to each family effected apologising for the incident and admitting responsibility for the loss of the personal data," said the website set up to sell the packs.

"However the letter has omitted to mention that the loss of this personal information constitutes a breach of the Data Protection Act 1998 and under the provisions of that legislation those affected by the loss of their personal data are entitled to claim compensation from those responsible for the mishandling of the data.

"Payment of compensation is not automatic and those claiming redress do so on the basis that they have suffered damage and also possibly distress."

Company director Philip Knight told the Daily Mail newspaper that 14,000 people had registered with it in relation to the pack. The company did not respond to requests for comment.

The Information Commissioner's Office freely publishes information on how someone can seek compensation for any damage suffered from a breach of the DPA.

"You can normally only claim for any distress you have suffered if you have also suffered damage," says its guidance (pdf). "However, if the organisation broke the Act when they used your information for journalism, artistic or literary purposes, you can claim for distress alone.

"Even when you can show the court the exact sum of money you have lost as a result of the breach of the Act, it is still up to the judge to make the award and he may reduce your claim or award nothing at all."

Guidance is also available at OUT-LAW.COM on the DPA and the rights people have under it.